I?d like to call everyone?s attention to an Economist article entitled ?The secrets of Buffett?s success: Beating the Market with Beta?.? Basically, this article is an executive summary of two academic working papers; 1)?Betting against beta, by A Frazzini and LH Pedersen, and?2) Buffett?s Alpha, by A Frazzini, D Kabiller, and LH Pedersen.
In a nutshell, the Economist article explains that two factors: 1) the low-beta nature of Warren Buffett?s portfolio, and 2) Buffett?s leveraging of his portfolio by a factor of 60% using low cost AAA-rated debt and debt-like financing from his insurance and reinsurance operations, pretty much explain all off Warren Buffett?s superior returns over the course of the last 35 years (tip of the hat to Dr. JT Rose and Dr.?Don Cunningham for bringing the Economist article to my attention).
Source: http://risk.garven.com/2012/10/25/the-secrets-of-buffetts-success-beating-the-market-with-beta/
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